FX Options
For details on expiry and settlement of FX options at Saxo, please refer to An introduction to FX options or consult the FX Options trading conditions for further information.
Listed options
Equity options are usually settled physically, whereas index options are normally settled in cash. Always check in the order ticket which settlement type applies to the option in question.
Cash settlement
With cash settlement, there is no delivery of the underlying asset; instead, the result is settled in cash. This is the case, for example, with index options, because an index itself cannot be bought or sold.
Physical settlement
With physical settlement, the underlying asset (usually a share or ETF) is actually delivered or taken up.
Example
If you have a long position in a Royal Dutch Shell (Shell) call option that is in the money at expiration, Saxo will generally exercise this option automatically for you. You will then receive the underlying shares in your portfolio.
Automatic exercise at expiration
Please note:
- In-the-money (ITM) options are, in principle, automatically exercised (for bought options) or assigned (for written options) on the expiration date.
- This applies to both call and put options, and to both long and short positions.
If you do not close a bought ITM call option before expiration, we will automatically exercise this option for you. In the case of physical settlement, you will then receive the underlying shares in your portfolio. In the case of cash settlement, the result will be settled in cash.
Post‑expiration adjustments: contrary instructions
After expiration, it may occur that the outcome of one or more option positions is adjusted retroactively. This is related to so‑called contrary instructions in the options market.
What normally happens at expiration?
What happens at expiration day depends on whether your options are ITM or OTM.
| As a standard rule in the options market, on the expiration day: | |
| All ITM options are automatically exercised/assigned | All OTM options automatically expire worthless |
| Based on this, on the expiration date we initially process your options as follows: | |
| ITM options: automatically exercised/assigned | OTM options: automatically expired worthless |
We do this so that:
- your margin and risk position can be calculated in a timely and accurate way;
- your portfolio can show as quickly as possible a realistic picture of your (potential) positions after expiration;
- we can immediately take measures, where necessary, to limit margin deficits or uncovered short positions.
What are contrary instructions?
Most listed options follow the exercise-by-exception rule, where ITM options are automatically exercised and OTM options automatically expire worthless.
When trading options, “contrary instructions" are instructions you give to override the default automatic exercise process at expiry. This means that:
| Option holders always have the right to: | |
| Choose not to exercise an ITM option; or | Exercise an OTM option anyway. |
When an option buyer submits such a conflicting instruction, it is called a contrary instruction. After receipt and processing by the market (for example via the central counterparty/clearing), the previously processed outcome of an option can be corrected.
| This can work in two ways: | |
| An option previously exercised/assigned as ITM can still be booked as worthless (OTM); | An option previously processed as worthless (OTM) can still be booked as exercised/assigned (ITM). |
What does this mean for you?
Due to such a correction, the following may occur:
- You may (continue to) be assigned on your written option position(s), as they are now visible in your portfolio;
- An option that previously appeared on your account as exercised/assigned can still be processed as worthless (or vice versa);
- Any underlying positions (shares/ETFs) that were previously created or closed automatically due to exercise/assignment may be reversed or adjusted.
As a result, your portfolio may still change after the initial expiration processing, for both ITM and OTM options.
What can you do in case of a post‑expiration correction?
If a correction has taken place on the expiration, we ask you to:
-
Check your account for:
- the (adjusted) expiration status of your options: ITM/OTM and whether or not exercised or assigned;
- the current status of your underlying positions (shares/ETFs, index exposure).
-
Adjust or cancel any related orders, for example:
- buy or sell orders in the underlying share;
- hedges or other strategy orders that are no longer appropriate due to the change.
-
Pay attention to any net short positions
If a (new or adjusted) net short position has arisen as a result of the change, we may have entered or modified a buy‑back order to cover this position. Check whether this still matches your investment objectives.